Fed Fight Fright

The opposition to Larry Summers as Federal Reserve Chair is growing. There is new petition demanding Obama not appoint Larry Summers and already has almost 100,000 signatures. Yet that doesn't seem to phase President Obama who some say seems bound and determined to nominate Summers to the post. Even twenty Senators wrote a letter and supposed Obama's response is to simply bugger off and why he explained in an interview.

Yet in spite of this , Felix Simon of Reuters gives a 65% chance President Obama will nominate Larry Summers to the post.

The trial balloon, it seems, has floated: Albert Hunt, today, puts Larry Summers’s chances of getting nominated as Fed Chair at 65%, saying that he has the support of just about everybody in the Obama administration not named Valerie Jarrett.

The Summers camp includes several top Obama economic advisers: director of the National Economic Council Gene Sperling, chairman of the president’s Council of Economic Advisers Jason Furman, director of the White House Office of Management and Budget Sylvia Burwell and Treasury Secretary Jack Lew…

When Obama discusses the choice, in private as well as public, he stresses the importance of selecting a chairman who can handle a financial crisis similar to 2008-09. Insiders believe that’s code for Summers.

Add to this bombshell, there is a corporate lobbyist group pushing for Summers to become Fed chair. We're seeing their article plants high and low on various news sites now.

The Center for American Progress (CAP), a progressive front group for corporate Democrats, has decided to go on the record in assisting Larry Summers’ quest to become Chair of the Federal Reserve.

Considering there are lobbyist groups trying to clear the great public relations path, generally speaking the situation is looking bleak. If Obama actually nominates Summers, the hope would then turn to the Senate and odds of a no rubber stamp Senate confirmation are nil.

Senators Bernie Sanders and Elizabeth Warren wrote an op-ed on four questions to ask Federal Reserve chair candidates in the Senate confirmation meeting. These seem targeted to Larry Summers who was a key player in dismantling Glass-Steagall and other financial regulations which the end game result was the financial crisis.

Do you believe that the Fed's top priority should be to fulfill its full employment mandate?

If you were to be confirmed as chair of the Fed, would you work to break up "too-big-to-fail" financial institutions so that they could no longer pose a catastrophic risk to the economy?

Do you believe that the deregulation of Wall Street, including the repeal of the Glass-Steagall Act and exempting derivatives from regulation, significantly contributed to the worst financial crisis since the Great Depression?

What would you do to divert the $2 trillion in excess reserves that financial institutions have parked at the Fed into more productive purposes, such as helping small- and medium-sized businesses create jobs?

Yves Smith hypothesizes the reason Obama wants to nominate Summers is he is a no holds barred corporatist:

Why has Obama gotten on the Summers bandwagon (we were told his candidacy was pushed by a faction in the White House and Obama was not initially on board)? One reason may be simply that he’s a Rubinite and that that faction has the right combination of pedigree, inducements (Obama is likely to follow the Clinton post-presidential playbook of forming a foundation plus giving speeches; no point in alienating a group of your loyal backers if you don’t need to) and 5×7 glossies to be persuasive.

But it is also possible that backing Summers is a no-lose proposition for Obama. Think about it. If Obama nominates Summers (and Wall Street is exceedingly eager to have Summers rather than Yellen in), he curries favor with all the right people. There is no personal upside for him to support Yellen. So the question really isn’t whether he nominates Summers; it is how hard he goes to the mat for him. There is considerable, well-justified opposition to Summers. Most critics, like Salmon, focus on his fealty to financial firms and the near-certainty that he’ll continue to strongly favor deregulation. We’ve highlighted his disastrous his tenure as Harvard president, where he insisted on gambling with the university’s operating funds, a strategy that ultimately produced over $2 billion in losses, as well as his lack of a basic ethical compass in refusing to discipline a colleague over egregious and politically damaging mismanagement of Harvard contract in Russia).

Also note that there has never been a woman chairing the Federal Reserve and charges of sexism are already surfacing. which obviously, from the lack of women generally are assuredly true. It's not like Yellen won't love Wall street less, after she she has been all for free money zero interest rates and quantitative easing.

The issue is now provoking lively debate in America as Barack Obama prepares to select the next chairman of the Federal Reserve. On paper, Janet Yellen, 66, the current vice-chair, seems an obvious contender: she is an accomplished economist with extensive government experience and – unlike many of her colleagues – not associated with bubble-era regulatory mistakes.

Our 2¢ on Summers and the reason he would be nominated after all is the threat of the Federal Reserve to break up too big to fail banks. We think lobbyists want to make sure that doesn't happen or anything else that financial reform brought. Many of the rules have yet to be written, even though Dodd-Frank passed over three years ago. Implementing many of those rules is under the charter of the Federal Reserve. With Summers at the helm, Wall Street can bank on those rules being delayed and dismantled.